Tough Times in The City by the Bay

Cable World, Nov 4, 2002

Byline: ANTHONY CRUPI

On certain days in San Francisco, you can close your eyes and almost pretend for a moment that the world isn't going all to hell. Today could be one of those days; there's a cool breeze nudging puffy white clouds across a cyan California sky, and it's so quiet you can hear the CD whirring around inside the car stereo. Here alongside South Park - a two-block oval of grass festooned with picnic benches in the heart of the city's South of Market district (SoMa) - you drive slowly, hunting for a parking spot. Just as you round Third St., you spy an opening in the line of cars. Pulling in, you see a few lengths ahead. And then another. And another. This is unbelievable; you've just scored bona fide rock star parking in South Park, the rarity of which is akin to bumping into J.D. Salinger at the Sizzler.

Talk about your economic indicators.

Two or three years ago, this place would have been packed tighter than a Barbary Coast peep show during Fleet Week. Before the bubble burst in April 2000, South Park was the still point of the turning dot-com world, an Interzone where the digital prophets at Wired and the venture capitalists behind Napster hung their shingles. Other companies arrayed around the park's proving ground - LookSmart, TheMan.com and Organic, to name but a few - helped to lend the scruffy strip of grass the air of a 23rd century village green. This was Multimedia Gulch, the place where the future intersected with the here and now, and if you weren't here you were, like, nowhere, man.

How times change. The blanket of polo-shirted worker bees that once spread over the lawn, scarfing down risotto-to-go while jawing about "stickiness" and "hits" and "eyeballs" has been replaced by a loose confederacy of sticky people hitting the sauce and giving you the eyeball. One such gentleman and his Pomeranian, a walking meringue, takes heed of your rental. "Don't know what it is you're looking for," the man says, sidling up like someone looking to sell a watch, "but it ain't here anymore."

He's right. Although it's not eminently quantifiable, there's no denying that there's been a swift and sizable exodus from the City by the Bay. After nearly eight years of a trend that saw more people moving into San Francisco than moving out, the city suffered a reversal from March 1, 2001, to April 15, 2001, when 12.7% more families moved out than moved in. San Jose, the "capital city" of Silicon Valley, experienced a 31.7% population reversal; Palo Alto said goodbye to a startling 43% more residents than it greeted.

One surefire way to get people to leave town is to make their jobs disappear. Following the death of the dot-com dream and the concomitant tech sector flameout, the unemployment rate in San Francisco rose from 1.7% in January 2001 to 7.5% in January 2002. (The national average in the first month of this year was 5.6%.) Meanwhile, the cost of doing business here continued to remain prohibitively high. San Francisco is the most expensive North American city for a high-tech company to do business, with an estimated average cost of $43 million a year, according to the Boyd Co., a consulting firm that advises major companies on location planning. For example, a company relocating from the Bay Area to Baltimore, one of the least-expensive towns in which to set up shop, would see a savings of about 21%, according to a Boyd study. (The numbers for the study were based on the average cost of operating a 500-employee facility.)

The Bay Area's sole cable operator, AT&T Broadband, has all this and more on its plate as it begins to get its house in order in anticipation of its merger with Comcast. SVP Don Schena candidly acknowledged the bruising effect the tech wreck has had on the MSO: "We're dealing with the issue on a number of fronts," he said. "Sure, the dot-com implosion led to a tremendous job loss, but there's more to it than that. Post-9/11, we've seen lots of tourism-related jobs erased. Overall, there have been 180,000 total jobs lost, and yet the cost of housing still hasn't gone down. This is all just a part of the discouraging downdraft we've all had to face here in San Francisco."

But the difficulties the system faces started long before residents began making tracks for Sacramento, Los Angeles and points beyond. The Bay Area has been served by no fewer than 16 different cable operators throughout the years, a situation that has left the system in many places looking like a crazy quilt of different equipment. "Given all the trades and swaps this network has seen over the years, it's no surprise that it hasn't had the level of upgrades it should," Schena said. "Equally critical, however, is the fact that we managed to take 16 cultures and get everyone moving in the same direction. Because of that, we've got some of the deepest penetration, in terms of advanced services, of all the AT&T Broadband systems."

Covering an area a little over 7,000 square miles and passing some 2.7 million homes, the Bay Area system is only 47% upgraded. Because so many of AT&T's customers aren't being offered advanced services, satellite has staked a sizable claim. "In a word, DBS is huge," Schena said. "It never ceases to amaze me when people say this isn't a competitive business. It's a competitive firefight every day."